Tax implication of refinancing main home for granny flat rental

[Kassi Chappell]

Hi BP,

We are looking to do a cash out refinance of our primary residence (no outstanding mortgage). Half of it will be to convert our garage to a granny flat for STR. My understanding is that the tax treatment is the same as if I were using that amount to buy a separate rental property. Specifically:

1. I can depreciate the granny flat

2. I can deduct mortgage interests

3. I can deduct a portion of property tax equal to the ratio of granny flat / (granny flat + main home)

4. The cost of construction gets added to the home basis

Is there anything I'm missing?